85) The Dog House expects sales of $770, $860, $950, and $960 for the months of May through
August, respectively. The company collects 84 percent of sales in the month of sale, 13 percent
in the month following the month of sale, and 1 percent in the second month following the month
of sale. The remaining sales are never collected. How much money does the company expect to
collect in the month of July?
A) $918
B) $856
C) $876
D) $874
E) $943
86) The Purple House has projected sales of $38,000, $47,500, $52,700, and $85,000 for
Quarters 1 through 4 of next year, respectively. Inventory is purchased at 58 percent of the sales
price and is purchased one quarter prior to the quarter of sale. The accounts payable period is 45
days. The accounts payable balance at the beginning of the year is $72,000. What is the amount
of the expected disbursements for the third quarter?
A) $29,058
B) $39,933
C) $40,250
D) $34,550
E) $28,333
87) Nadine’s Boutique has an accounts payable period of 30 days. Sales of $3,300, $3,400,
$4,600, and $4,100 are expected for Quarters 1 through 4, respectively. The cost of goods sold is
equal to 62 percent of the next quarter’s sales. The accounts payable balance is $975 as of the
beginning of Quarter 1. What is the amount of the projected cash disbursements for accounts
payable for Quarter 2 of next year? Assume a year has 360 days.
A) $2,645
B) $2,486
C) $2,567
D) $2,604
E) $2,670
88) Kid’s Delight expects to sell $135,900 of toys in December, $64,700 in January, $74,400 in
February, and $56,800 in March. The wholesale cost is 58 percent of the retail price. The
receivables period is 30 days, the payables period is 60 days, and all inventory is purchased one
month prior to selling it. What is the accounts payable balance at the end of February? Assume a
year has 360 days.
A) $74,544
B) $80,678
C) $79,327
D) $76,168
E) $76,096
89) As of the beginning of the quarter, Callahan’s had a cash balance of $710. During the quarter,
the company collected $1,860 from customers and paid suppliers $1,520. The company also paid
a loan payment of $320 and a tax payment of $510. What is Callahan’s cash balance at the end of
the quarter?
A) $110
B) $290
C) $220
D) $150
E) $90
90) On May 1, Jensen’s had a beginning cash balance of $284. April sales were $810 and May
sales were $960. During May, cash expenses were $360 and payments on accounts payable were
$630. The accounts receivable period is 30 days. What is the beginning cash balance on June 1?
A) $145
B) $254
C) $104
D) $183
E) $265
91) The Box Store has a beginning cash balance of $318 on March 1. Projected sales are $720
for February, $850 for March, and $980 for April. The cost of goods sold is equal to 57 percent
of sales with goods being purchased one month prior to the month of sale. The accounts payable
period is 45 days and the accounts receivable period is 20 days. The firm has monthly cash
expenses of $274. What is the projected ending cash balance at the end of March? Assume every
month has 30 days.
A) $342
B) $360
C) $407
D) $418
E) $372
92) Duck-n-Run has projected sales of $280,000 for January, $315,000 for February, and
$336,000 for March. The company collects 62 percent of sales in the month of sale, 35 percent in
the month after sale, and 3 percent two months after sale. The accounts receivable balance at the
end of the previous quarter was $9,600. What is the amount of the February collections?
A) $293,300
B) $326,970
C) $302,900
D) $301,333
E) $293,588
93) DM Electronics has projected sales of $1,700, $1,900, $2,400, and $4,200 for Quarters 1 to
4, respectively. Sales in the following year are projected to be 4 percent greater in each quarter.
Assume purchases during each quarter equal 48 percent of projected sales for the following
quarter. How much will be paid to suppliers in Quarter 2 if its accounts payable period is 30
days?
A) $1,146
B) $1,108
C) $1,072
D) $1,251
E) $984
94) TDC’s purchases from suppliers in a quarter are equal to 61 percent of the next quarter’s
forecasted sales. The payables period is 60 days. Wages, taxes, and other expenses are 18 percent
of sales, and interest and dividends are $72 per quarter. No capital expenditures are planned. The
projected sales for Year 1 are $730, $770, $710, and $850 for Quarters 1 to 4, respectively. Sales
for the first quarter of Year 2 are projected at $760. What is the amount of the total
disbursements for Quarter 3 of Year 1?
A) $672
B) $661
C) $649
D) $678
E) $634
95) Assume Laksko’s has credit sales of $462,400 in March, $507,500 in April, and $550,200 in
May. Also assume that 64 percent of sales are collected in the month of sale, 35 percent are
collected in the following month, and the remainder are never collected. Credit purchases are
$224,600 in March, $236,700 in April, and $252,700 in May. Credit purchases are paid in 30
days. Interest is $12,400 a month, wages and other expenses are $64,400 a month. Fixed assets
purchases of $119,500 are scheduled for April with additional purchases of $56,400 in May. The
April 1 cash balance was $321,060 and taxes of $180,000 must be paid on April 15. What is the
cash balance at the end of May?
A) $348,887
B) $351,008
C) $414,141
D) $440,777
E) $366,653
96) You’ve worked out a line of credit arrangement that allows you to borrow up to $35 million
at any time. The interest rate is .52 percent per month. In addition, 2.5 percent of the amount that
you borrow must be deposited in a non-interest-bearing account. Assume your bank uses
compound interest on its line of credit loans. What is the effective annual interest rate on this
lending arrangement?
A) 6.59 percent
B) 6.72 percent
C) 6.42 percent
D) 6.87 percent
E) 6.94 percent
97) Fancy Footwear has a line of credit with a local bank in the amount of $175,000. The loan
agreement calls for annual interest of 6.8 percent with a compensating balance of 3 percent of the
total amount borrowed. The compensating balance will be deposited into an interest-free
account. What is the effective interest rate on the loan if the firm needs $125,000 to cover
expenses for one year?
A) 7.01 percent
B) 7.13 percent
C) 6.94 percent
D) 7.17 percent
E) 7.08 percent
98) Juno Industrial Supply has a line of credit of $200,000 with an interest rate of 7.1 percent.
The loan agreement requires a compensating balance of 3.3 percent of the total amount
borrowed, which will be held in an interest-free account. What is the effective interest rate if the
company requires $132,000 for operations for one year?
A) 7.27 percent
B) 7.21 percent
C) 7.38 percent
D) 7.53 percent
E) 7.34 percent
99) Rachel’s has a $45,000 line of credit with an interest rate of 7.4 percent and a compensating
balance requirement of 2.75 percent. The compensating balance is based on the total amount
borrowed with funds being held in an interest-free account. What is the effective annual interest
rate if the company requires $28,000 of borrowed funds for one year?
A) 7.64 percent
B) 7.58 percent
C) 7.51 percent
D) 7.61 percent
E) 7.42 percent
100) Foods Galore has a line of credit of $325,000 with an interest rate of 1.85 percent per
quarter. The credit line also requires that 2.5 percent of the unused portion of the credit line be
deposited in a non-interest-bearing account as a compensating balance. Food Galore’s short-term
investments are earning .48 percent per quarter. What is the effective annual interest rate on this
arrangement if the line of credit goes unused all year? Assume any funds borrowed or invested
use compound interest.
A) 7.61 percent
B) 10.38 percent
C) 1.93 percent
D) 2.14 percent
E) 3.47 percent
101) The Sports Store has a $230,000 line of credit that requires 1.5 percent of the unused
portion of the credit line be deposited in a non-interest-bearing account as a compensating
balance. The interest rate on the borrowed funds is 2.05 percent per quarter. The Sports Store’s
short-term investments are paying 1.5 percent per quarter. What is the effective annual interest
rate on the line of credit if the entire credit line is borrowed for one year? Assume any funds
borrowed or invested use compound interest.
A) 8.46 percent
B) 8.20 percent
C) 8.61 percent
D) 8.68 percent
E) 8.54 percent
102) Your bank offers you a line of credit of $35,000 with an interest rate of 1.95 percent per
quarter. The loan agreement also requires that 2 percent of the unused portion of the credit line
be deposited in a non-interest-bearing account as a compensating balance. Your short-term
investments are paying .17 percent per month. What is your effective annual interest rate on this
arrangement if you do not borrow any money during the year? Assume any funds borrowed or
invested use compound interest.
A) 8.19 percent
B) 2.06 percent
C) 2.18 percent
D) 8.03 percent
E) 8.11 percent
103) New Town Bank offers you a line of credit of $50,000 with an interest rate of 2.1 percent
per quarter. The loan agreement also requires that 2.5 percent of the unused portion of the credit
line be deposited in a non-interest-bearing account as a compensating balance. Short-term
investments are currently paying .68 percent per quarter. What is the effective annual interest
rate on the line of credit if you borrow the entire amount for one year? Assume any funds
borrowed or invested use compound interest.
A) 8.40 percent
B) 8.89 percent
C) 8.67 percent
D) 8.51 percent
E) 8.62 percent
104) \The Delta Fish Hatchery factors its accounts receivables immediately at a discount rate of
1.2 percent. The average collection period is 36 days. Assume all accounts are collected in full.
What is the effective annual interest rate on this arrangement?
A) 13.02 percent
B) 13.68 percent
C) 12.09 percent
D) 11.78 percent
E) 12.79 percent
105) Marci’s has an average collection period of 34 days. Current practice is to factor all
receivables immediately at a discount rate of 1.8 percent. Assume that default is extremely
unlikely. What is the effective cost of borrowing?
A) 18.79 percent
B) 16.20 percent
C) 17.78 percent
D) 20.97 percent
E) 21.53 percent
106) The Corner Store factors all of its receivables immediately at a discount rate of 1.1 percent.
The average collection period is 37.4 days and default is unlikely. What is the effective cost of
borrowing?
A) 10.24 percent
B) 13.97 percent
C) 15.82 percent
D) 11.40 percent
E) 12.58 percent
107) Craft Shack has a beginning cash balance for the quarter of $1,213. The store has a
policy of maintaining a minimum cash balance of $1,000 and is willing to borrow funds
as needed to maintain that balance. Currently, the firm has a loan balance of $410. How
much will the store borrow or repay if the net cash flow for the quarter is −$260?
A) Neither borrow nor repay
B) Repay $47
C) Repay $26
D) Borrow $47
E) Borrow $20
108) Cement Works has a beginning cash balance for the quarter of $1,211. The company
requires a minimum cash balance of $1,200 and uses a loan account to maintain that balance. If
funds have been borrowed, then they are repaid as soon as excess funds are available. Currently,
the outstanding loan balance is $1,318. How much will be borrowed or repaid this quarter if the
quarterly receipts are $4,209 and the quarterly disbursements are $3,807.
A) Borrow $416
B) Borrow $402
C) Borrow $413
D) Repay $413
E) Repay $402
109) At the beginning of the year, BJ’s had an outstanding short-term loan of $527. The interest
charges for the year were $31 and the annual net cash flow was $211, prior to any payment of
principal or interest on the loan. What is the anticipated loan balance at year-end?
A) $451
B) $347
C) $558
D) $769
E) $693